ch05-AFM101w2012

ch05-AFM101w2012 - Financial Accounting 5-1 PowerPoint...

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Unformatted text preview: Financial Accounting 5-1 PowerPoint Author: Robert G. Ducharme, MAcc, CA University of Waterloo, School of Accounting and Finance FINANCIAL ACCOUNTING Fourth Canadian Edition LIBBY, LIBBY, SHORT, KANAAN, GOWING Reporting and Interpreting Cash Flows Chapter 5 5-2 Financial Accounting Understanding the Business Positive cash flows permit a company to . . . Expand its operations . Expand its operations . Replace needed assets. Replace needed assets. Take advantage of market opportunities. Take advantage of market opportunities. Pay dividends to owners. Pay dividends to owners. Financial analysts consider cash flow an important indicator of a companys financial health. Financial analysts consider cash flow an important indicator of a companys financial health. LO 1 5-3 Financial Accounting Cash Cash Currency Cash Equivalents Short-term, highly liquid investments. Readily convertible into cash. So near maturity that market value is unaffected by interest rate changes (i.e., original maturities of less than 3 months). Short-term, highly liquid investments. Readily convertible into cash. So near maturity that market value is unaffected by interest rate changes (i.e., original maturities of less than 3 months). Classifications of the Statement of Cash Flows LO 1 5-4 Financial Accounting Classifications of the Statement of Cash Flows Operating Activities Cash inflows and outflows directly related to earnings from normal operations. Investing Activities Cash inflows and outflows related to the acquisition or sale of productive facilities and investments in the securities of other companies. Financing Activities Cash inflows and outflows related to external sources of financing (owners and creditors) for the enterprise. LO 1 5-5 Financial Accounting Investing Activities Operating Activities Financing Activities Sale of operational assets Sale of investments Collections of loans Cash received from revenues Issuance of shares Issuance of bonds and notes CASH INFLOWS Business CASH OUTFLOWS Purchase of operational assets Purchase of investments Loans to others Cash paid for expenses Payment of dividends Repurchase of shares Repayment of debt LO 1 5-6 Financial Accounting Cash provided by (used in) operating activities: Net earnings / Profit 3,517 $ Items not affecting cash: Depreciation of plant equipment 2,126 Deferred income taxes (1,562) Changes in non-cash operating working capital items: Increase in trade receivable (5,509) Increase in inventories (1,382) Increase in prepayments (1,006) Increase in trade payables 5,708 Decrease in accrued liabilities (1,165) 727 Cash provided by (used in) investing activities: Purchases of property, plant and equipment (3,006) Proceeds from long-term investments 58 (2,948) Cash provided by (used in) financing activities: Repayment of long-term debt (464) Increase in bank borrowings 3,882 Payment of dividends (1,197) 2,221 Net increase (decrease) in cash & cash equivalents-Cash & cash equivalents at beginning of period...
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ch05-AFM101w2012 - Financial Accounting 5-1 PowerPoint...

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